Global semiconductor market drives European fab upgrades
By George Miller
Construction spending and cleanroom space growth are in line with past several years, driven by migration to 300-mm technology
Boasting 12 percent of the world’s integrated-circuit fabrication capacity, and nearly one-third of the world production of power devices, Europe accounted for some $6.6 billion in semiconductor equipment and materials spending in 2007, according to the trade group SEMI.
For the traditional semiconductor IC fabs, construction spending in Europe was expected to exceed $700 million last year, rising from $450 million in 2006. In terms of fabs purchasing equipment, companies are expected to spend about $2.5 billion, a decline from the more than $3 billion of 2006. SEMI expects spending to increase by about 9 percent in 2008.
General trends in the semiconductor industry are mirrored in the contamination control market, according to Risto Puhakka, president at market research company VLSI Research in Santa Clara, CA.
“The number one [European semi-conductor equipment] supplier is ASML Holding NV (Veldhoven, Netherlands), and its outlook is very optimistic for 2008, based on a strong backlog,” says Puhakka. “The rest of European semiconductor makers will follow industry expectations more closely. We expect them to be slightly down.”
With ASML comprising such a large part of the European equipment market, “it may pull all of Europe onto the positive side,” Puhakka says.
The state of the economy is the biggest concern. “So far we haven’t seen electronics demand slowing in a considerable way,” he says. Yet, “[the economy is] the overarching problem.”
Market intelligence concern iSuppli Corp. (El Segundo, CA) agrees, and in late December cut its 2008 revenue growth forecast for the global semiconductor industry to 7.5 percent from 9.3 percent, based on rising energy costs and expectations of a U.S. economic slowdown.
Market and fab diversity
Europe is home to more than 278 production and R&D fabs that manufacture various integrated circuits, microelectromechanical systems (MEMS), power devices, compound semiconductors, and innovative packages, according to SEMI. Included in this population are several 300-mm wafer fabs, and several fabs boasting sub-90-nm technology.
Europe is also home to three world-class semiconductor R&D centers of excellence: Inter-university Micro Electronics Center (IMEC) in Belgium, Laboratory of Electronics and Information Technology (LETI) in France, and Fraunhofer Institute in Germany. In light of changing markets and emerging opportunities, several European device companies and equipment companies have increased their involvement in the area of MEMS and photovoltaics (PV) manufacturing.
Regarding cleanrooms in Europe, the outlook is for growth that is in line with that of the last few years. A major driver is the migration to 300-mm processing technology.
Among the more recent of these migrations is dynamic RAM supplier Qimonda AG, which announced in late December that it would increase to approximately 90 percent its share of 300-mm capacity and reduce capacities at its 200-mm manufacturing facilities worldwide.
The company is discontinuing its contract manufacturing of 200-mm Qimonda products by Infineon Dresden. The last wafers for Qimonda were expected to enter production in February 2008, the company says. Qimonda’s cornerstone activities in Dresden moving forward will be its 300-mm manufacturing and research and development activities.
Similarly, at its Richmond, VA site in the U.S., the number of 200-mm wafer starts will be reduced by about 15 percent, in the context of switching capacities from 110-nm to 80-nm technology. The remaining 200-mm capacity will continue to be used for manufacturing legacy products.
In Asia, contract manufacturing of 200-mm capacity by Qimonda partners Winbond and SMIC were discontinued by the end of 2007.
Market researcher McIlvaine Co. expects Europe to see the addition of more than 3 million square feet of cleanroom space in 2008, bringing the total cleanroom space in use to nearly 24 million square feet (see Table 1).
From a global perspective, memory–especially dynamic RAM–is in a state of oversupply. According to Puhakka of VLSI Research, “There’s no profitability. Suppliers can’t invest in more manufacturing capacity.”
“Most predictions say that in the second half of this year, [the memory oversupply situation] should start to improve,” he added. “We’re more pessimistic. There needs to be [industry] restructuring to limit supply more. It will probably take a full year to work its way through.”
As if on cue, Japanese chip maker Fujitsu announced in late January that it too would join in the restructuring, though it had thus far avoided a recent flurry of process development alliances reshaping the semiconductor industry. The company announced that it would put its LSI business divisions into a new subsidiary and devote its semiconductor technology development center to other purposes. The company will move process development and prototyping equipment from a 200-mm facility in Tokyo, some 300 km south, to a 300-mm production fab in Mie prefecture. It will continue 45-nm logic process development at the Mie fab, where application-specific ICs and other logic products are made.
Beyond the semiconductor industry restructuring that’s underway, a broader electronics manufacturing global rebalancing is taking place as well, according to iSuppli. The rebalancing is the result of a shift in executive thinking to total cost of fab ownership, rather than just the cost of labor.
In the early 2000s, manufacturing capacity abruptly shifted from the high-cost regions of North America and Western Europe, to the low-cost nation of mainland China, according to Adam Pick, a principal analyst at iSuppli. However, the second half of this decade is revealing the change in thinking.
Total cost of ownership
The regional diversification by electronics manufacturers can be attributed to other China-centric factors, including a mobile workforce, inflation, taxes, and the rising costs of transportation due to soaring oil prices. According to Pick, in an iSuppli announcement, “The emphasis has greatly shifted to total cost of ownership, which considers managerial resources, organizational structuring, manufacturing competencies, intellectual property, and, of course, logistics.”
He added that recent capacity expansions of electronic manufacturing service providers, original design manufacturers, and OEMs reveal several trends impacting the global electronics manufacturing business.
First is the rising penetration of emerging regional economies, a factor that continues to be critical for many EMS and ODM providers. India’s domestic market has attracted foreign direct investment by such leading providers as Foxconn, Flextronics, and Jabil.
More recently, however, Russia has become a focal point for electronics manufacturers. While television specialist Vestel A.S. has been building its ODM/Own Brand Manufacturing presence in Russia for some time, Foxconn Electronics Inc. in August 2007 announced a $50 million investment in the nation to build data-processing systems for Hewlett-Packard Co.
“The second trend is that proximity to large, local markets with fast-growing product segments appears to be critical to ODMs,” Pick says. This is particularly true for companies that want to establish liquid-crystal display television manufacturing for western European distribution.
Wistron Co. Ltd. and Quanta Computer Inc. recently established capacity in Eastern Europe to build flat-panel sets for OEMs, including Sharp Electronics Corp. and Hewlett-Packard Co. According to Pick, “The ODMs’ local presence in the region helps minimize tariff costs throughout the European Union.”
The largest spenders in terms of European fab construction projects and equipment purchases in the second half of 2007 were AMD and Intel, according to the SEMI Fab Capacity database.
Stuttgart-based M+W Zander was awarded the order to support AMD’s conversion of its semiconductor factory Fab 30 to Fab 38 (The name Fab 38 comes from its existence 38 years after the founding of AMD), while continuing to carry out routine operations at the Dresden facility without interruption. M+W Zander will also be responsible for the hook-up of utility systems to the machinery assets of the new Bump Test building and expansion at Fab 36.
Fab 38 is being created by remodeling Fab 30. Future production at the remodeled fab will be carried out on 300-mm wafers, while Fab 30 currently manufactures microprocessors using 200-mm technology. The conversion will enable Fab 38 to make a substantial contribution to the planned capacity increase at the Dresden site.
Numonyx, the Flash joint venture between Intel and STMicroelectronics, was expected to spend $600 million for upgrades at its Fab 18 facility in Israel (Fab 18 manufactures processors using 0.18-µm technology).
SEMI also says it expects the unoccupied 300-mm fab (M6) in Catania, Italy, to be reactivated under the Numonyx joint venture.
Top fab capacities
In 2007, four companies were responsible for most of the fab capacity in Europe: Infineon, Intel, NXP, and STMicroelectronics. They have a combined capacity of more than 700,000 wafers per month (in 200-mm equivalents), accounting for 41 percent of all European fab capacity, according to SEMI.
STMicroelectronics NV in January attributed at least part of its success to the rising popularity of integrated digital TV.
iSuppli predicts that global revenues from the DTV chip market will reach $14.2 billion in 2011, rising from $7.1 billion in 2006. The total includes revenues generated from chips on DTV audio/video boards, as well as from other TV components, including I/O circuitry, drivers, audio, and power supplies.
“The growth of the DTV chip market parallels the expansion of the DTV market itself,” says Shyam Nagrani, principal analyst for display electronics at iSuppli. ‘Global DTV shipments will rise to 230 million units by 2011, nearly three times the 77.4 million in 2006.”
STMicroelectronics claimed it had increased MPEG-2 market share in 2007, shipping 10 million decoders for iDTV. iSuppli pegged the European market for iDTV at 12 million sets.
Comparing fab capacities within Europe, the powerhouses are Germany, France, and Ireland. Dresden is considered the hot spot, hosting Infineon, Qimonda, and AMD. Ireland is lead by Intel, which maintains two 12-inch fabs and one 8-inch fab in Lexlip. In France, STMicroelectronics, Altis, Atmel, and Freescale are the leading fabs providing most of the capacity. STMicroelectronics is also the leader in Italy, followed by Micron and Numonyx.
MEMS and solar markets
SEMI expects the global solar photovoltaic market, which currently exceeds $7 billion, to reach more than $16 billion in 2012. Some 200 companies globally produce manufacturing equipment for the photovoltaic market and nearly half are headquartered in Europe. Many semiconductor suppliers are diversifying into photovoltaics, according to SEMI. These companies are using their semiconductor experience to build state-of-the-art production systems and facilities to produce cells and modules.
The MEMS equipment market reached $646 million worldwide in 2006, and SEMI projects growth to $838 million in 2009 and $999 million in 2011. The five-year CAGR forecast for MEMS equipment is 9 percent.
According to the January European Microelectronics Market Study, Europe accounts for 16 percent of MEMS worldwide sales, and Germany has the highest number of MEMS fabs.
European companies continue to diversify and grow in these markets, SEMI says. Faced with tough competition from other regions, Europe is pursuing its drive to 300-mm technology. Its strong R&D infrastructure and diversity of chip markets addressed will likely continue to yield additional revenues and market share, despite any pending economic slowdown.